NRJ, a group that is buying underperforming stations with an eye on cashing in on the FCC's proposed incentive auction, outbid two others in a Nov. 15 auction for WSAH, a bankrupt independent licensed to Bridgeport, Conn., on the fringe of the New York market. But its high bid of $22.8 million may not be enough. Arthur Liu, the original owner of the station, is challenging the sale process in bankruptcy court.
DMA 1
NRJ Wins Bidding For WSAH New York, But …
Spectrum speculator NRJ TV LLC won a Nov. 15 auction for Multicultural Television Broadcasting’s bankrupt WSAH New York (Bridgeport, Conn.) with a bid of $22.8 million, but the bankruptcy court is considering a challenge of the auction and has yet to approve the transaction.
The challenge comes from the Arthur Liu, the original owner of Multicultural who bought WSAH and four other stations from E.W. Scripps in 2006 for $170 million, but soon defaulted on his loans. The stations were placed in trust to be sold. After four were sold, the trustee filed for Chapter 11 bankruptcy in Delaware and arranged for the auction of WSAH.
Liu claims that the sale process for WSAH was not conducted in good faith and that NRJ had inside information about the finances and operation of the station and unfairly used credit it had in the station in its bidding, according to court records.
NYVV, a group associated with Liu and headed by Barbara Laurence, was one of two losing bidders in the auction. The other was Wood Creek Asset Fund LLC.
NRJ has been buying underperforming stations, hoping to sell them through the FCC’s proposed incentive auction and turn a profit.
Under its auction plan, the FCC would split the proceeds between the federal treasury and any broadcaster who voluntarily offers spectrum for auction. To conduct such auctions, the FCC must first get congressional authorization. It’s uncertain when or if that authorization will come.
BRAND CONNECTIONS
Through layers of companies, NRJ is owned equally by Ted Bartley, Titan Broadcast Management (Bert Ellis, principal) and station broker Larry Patrick.
Last September, NRJ purchased WTVE Philadelphia from Richard French for $30.4 million. Earlier, it purchased two other Multicultural stations — KCNS San Francisco and WMFP Boston — after they had been placed in trust. NRJ paid $20 million for the pair — $15 million for KCNS and $5 million for WMFP.
NRJ had made a stalking horse bid of $12 million for WSAH, but six hours of bidding on Nov. 15 by NRJ, NYVV and Wood Creek pushed the price to $22.8 million, according to court filings.
In his challenge of the auction, Liu is arguing that NRJ had inside and confidential information about the station based on the facts that Ted Bartley used to be employed by Fortress Investment Group, one of Multicultural’s original backers, and that Titan Management has been operating the station under contract since May.
Liu contends that NRJ should not have been able to use the interest it had in the station from having previously purchased some of the debt as a credit in its bidding — a so-called credit bid.
In its brief to the court, NRJ counters that “the holder of a claim secured by the property to be sold may bid at the sale and may offset such claim against the purchase price.
And according to precedent, it says, “lenders are entitled to bid the full amount of the debt, regardless of the holders’ basis in the debt.”
Comments (2)
Hope Yen and Charles Babington says:
November 29, 2011 at 9:38 am
Does anyone recall the days when the FCC regs provided a licensee keep a station for a minimum of three years before selling? Today we flip stations as fast as we flipped (note past tense) houses. What happened to the American Dream of owning one’s own home ended badly when greed, dropping lending criteria to satisfy ill conceived congressional mandates and the desire to flip for a fast buck dominated the market. We now see the same thing happening with the once proud and unique American broadcast system descent into just another overregulated tool of Congress, putting huge sums into the hands of a few arbitrageurs while audiences and the public interest, convenience and necessity goes in the trash heap along with way too many other ‘old fashioned’ American values. Sad.
Ellen Samrock says:
November 29, 2011 at 12:38 pm
I think Multicultural’s intentions when they bought these stations were good but, similar to the housing market at its peak, they over-paid for them and got into financial difficulties as the economy took a downturn. And like so many in the housing market their properties have lost significant value. So far, Multicultural has netted only 31.5 million on the sale of four of these former Scripps stations. If WSAH does sell for 22.8M that means they’ve re-cooped only 54.3M total or less than a third of what they originally paid for them. In this situation, I’m not sure which is the better strategy, conducting a fire sale or hanging on to the stations until the economy improves.